The first quarter of 2018 recorded a number of improvements on the economic front over the previous quarter of last year. Helped by recovering crude oil prices and higher oil production, the economy is seen on a positive path.
This is following the return of the economy to positive Gross Domestic Product (DGP) growth trajectory after the country exited the worst recession that spanned for five consecutive quarters in the second quarter of 2017.
“Macroeconomic indicators recorded progress in the quarter, as inflation rate moderated, exchange rate was stable, Purchasing Managers’ Index (PMI) expanded well above 50 percent and when the expected GDP figures are released, there will be an increase,” Johnson Chukwu, MD of Cowry Asset told BusinessDay by phone.
Nigeria’s recovery gained speed in the fourth quarter of last year, with growth hitting a two-year high. According to data released by the National Bureau of Statistics, GDP expanded 1.9 percent annually in Q4, above the 1.4 percent increase in Q3 of the same year. The result brought full year growth to 0.83 percent in 2017, contrasting 1.6 percent sharp drop in GDP in 2016.
According to the NBS calendar, the 2018 first quarter GDP by output report will be published on May 22 2018.
“Improvement in oil prices and level of production, at a level not recorded in a long time, are the benchmark upon which positive growth will be recorded in the first quarter of 2018, considering it is the highest source of the nation’s revenue and foreign exchange,” Ayo Akinwumi, Head of Research FSDH Merchant Bank said.
“Although growth still remains fragile, owing to its dependence on oil, and only two out of the six leading sectors in the country exited recession in full year 2017; agricultural sector and milling, as others recorded negative growth,” Akinwumi said.
Global benchmark, Brent crude has gained some 125 percent since hitting a decade-low of $28 per barrel in January 2016, trading at $63 per barrel as of Tuesday, 3 April 2018, according to Bloomberg data.
Nigeria’s production has also recovered to 1.8 million barrels daily, according to OPEC data. That’s a 50 percent jump from when output crashed to 1.2 million in the thick of disruptions inflicted by militants in the delta.
Early data for the first few months of 2018 suggests that the economy’s positive momentum was carried over into the New Year.
“The first quarter is flat, as it is similar to the fourth quarter of the previous year, although things are positive but not great,” Bismarck Rewane, MD of Financial Derivatives told BusinessDay.
Nigeria’s foreign exchange reserves stood at $46.2 billion as of March 28, up 8.8 percent from a month earlier, central bank data showed.
Successful debt sales, including a eurobond offering last month, have helped the government accrue billions of dollars in foreign reserves, although they remain far from the peak of $64 billion reached in August 2008.
The rate at which the prices of goods and services increase in Nigeria (inflation) slowed to 14.33 percent in February from 15.13 percent the previous month, making it the thirteenth straight month of decline, but still remains well above the 6-9 percent preferred band, according to data provided by the National Bureau of Statistics (NBS).
Nigeria’s Purchasing Managers’ Index (PMI), rose strongly in March from 54.7 percent to 59.4 percent, the production level index for the manufacturing sector grew for the thirteenth consecutive month in March 2018.The index indicated a faster growth and expansion in the current month, when compared to its level in the preceding month.
The Naira remained stable in the period under review at the CBN official rate of N305 to the dollar.
Also, despite the bearish trend that prevailed in the equities market on the Nigerian Stock Exchange (NSE), for most part of March 2018, activities in the market ended the first quarter, on a bullish note, resulting in N1.38 trillion gains to investors.
On the outlook for Africa’s largest economy, Akinwumi said more expansionary policy should be implemented to ensure a broader growth that will be inclusive which will in turn reduce unemployment and inflation rate.
On whether the forth coming election will have negative or positive effects on economic performance, Chukwu said the economic outlook for Nigeria is positive, although political activities may dampen the economic environment and as such the economic growth.
In contrast, Akinwumi said the current administration will want to put in all its effectors to get the economy to a level where it will be able to speak as a scorecard when they want to campaign to be re-elected into power.
Looking ahead, dynamics in the oil sector will be vital to encouraging a faster recovery and higher oil prices should fuel stronger growth in 2018. However, still-high inflation, a weak business climate and security risks continue to cast a shadow over the country’s prospects.
The World Bank anticipates Nigeria growth to accelerate to 2.5 percent this year from 1 percent in the previous year. An upward revision to Nigeria’s forecast is based on expectation that oil production will continue to recover and that reforms will lift non-oil sector growth.
ENDURANCE OKAFOR
